Pfizer ($PFE) has quietly shuttered a Phase II Alzheimer's drug study, noting the termination in a pipeline update released today with its annual numbers for 2015. And shares of Axovant ($AXON) tumbled 25% on the news as it faces fresh questions about the implications of the failure on a similar drug it has pushed into a Phase III trial.

According to clinicaltrials.gov, Pfizer--which has invested heavily in Alzheimer's R&D over the years--opted to end the study of PF-05212377 on Oct. 23 based on futility, or a conclusion that the drug would fail the key endpoint laid out for it. The move puts the spotlight on the drug's mechanism of action, raising fresh questions about the likely efficacy of other drugs that try to safeguard cognitive abilities by targeting the serotonin 6 receptor (5-HT6).

"We decided to terminate the Phase II study (B2081011) of our investigational program PF-05212377 following an External Data Monitoring Committee recommendation after a planned unblinded review of the interim efficacy data," noted a spokesperson for Pfizer in a response to a query from FierceBiotech. "We're currently evaluating next steps for this program, including plans for publishing the results of this trial."

This particular study was focused on mild to moderate patients already on stable doses of donepezil, gauging their cognitive response on the ADAS-cog13 score. Alzheimer's R&D has been largely a disaster zone for the past decade, as researchers try to find a population of patients that will respond to one of the drugs in development. Most of the high-profile efforts on Alzheimer's center on the theory that toxic clusters of amyloid beta trigger the disease. But 5-HT6 takes a different route in the brain, looking to boost levels of dopamine.

Axovant CEO Vivek Ramaswamy

At least two other companies are likely going to study the data from this trial closely. Axovant, which was hit on its stock price immediately as news of the termination spread, is also focused on the same target. Axovant CEO Vivek Ramaswamy bought the drug--which had failed four times in midstage studies--from GlaxoSmithKline ($GSK) for only $5 million, and then flipped it into a record $2 billion IPO at a time biotech stocks were hot.

The drug, now dubbed RVT-101, did register a modest success on an ADAS-cog score, when combined with Aricept. And that's what Axovant is now gambling on. On Tuesday morning, roughly $400 million in market cap melted away from the biotech as investors fled at the indication of potential trouble ahead.

Axovant did not immediately reply to a query from FierceBiotech, but company execs were quick to respond through Evercore ISI analyst, and Axovant enthusiast, Mark Schoenebaum, who's given the drug a 65% chance of success.

According to Schoenebaum, Axovant believes that "the dose PFE took into phase 2 appears far too low from a receptor occupancy standpoint. AXON believes at least 90% receptor occupancy is required for efficacy, but the dose PFE selected is half of the dose that achieved ~70% occupancy.

"The patients population enrolled in the PFE trial is very different from AXON's (and different from most other AD trials). Most AD trials explicitly EXCLUDE AD patients with neuro-pychiatric issues - this population represents around 10% of the AD population," the analyst adds. "This could be why it took PFE 3 years to achieve 50% enrollment in its trial. In addition, PFE did not measure a functional endpoint (which would be challenging in this population). Instead the used the neuro-psych inventory."

Lundbeck and Otsuka have had some success, as well as failure, with their Phase III therapy Lu AE58054 in combination with donepezil, which cleared a midstage primary endpoint for ADAS-cog but failed on all secondary endpoints. That's the widely viewed leader in the field, which Axovant is now trying to beat to the FDA. And AbbVie ($ABBV) has its own 5-HT6 drug in Phase II: ABT-354.